Megaupload Shut Down By The FBI

Click the link above to listen to Laura Sydell's conversation with Morning Edition's David Greene about the Megaupload indictment and the attack on the Department of Justice's website by the group Anonymous.

Megaupload, one of the world's most popular file-sharing sites, was shut down Thursday as the U.S. Department of Justice charged its founder and several executives with violating piracy laws. As a technology used to transfer files too large to be sent by email, Megaupload has perfectly legitimate uses, but the Motion Picture Association of America claims that most of the content transferred over the site violates U.S. copyright laws.

The Justice Department agreed, and today in Virginia a grand jury unsealed a 72-page indictment against defendants including Megaupload Limited and individuals including the company's founder, Kim Dotcom, as members of "the 'Mega Conspiracy,' a worldwide criminal organization whose members engaged in criminal copyright infringement and money laundering on a massive scale with estimated harm to copyright holders well in excess of $500 million and reported income of $175 million."

Four individuals associated with the site have already been arrested in New Zealand. They include Megaupload's founder. The German-born Dotcom, aka Kim Schmitz, has notoriously managed to maintain a rather high profile despite prior accusations of copyright infringement. For a look at Dotcom's battle with Perfect 10, an adult-entertainment company, check out this profile on CNET.

Megaupload is just one of a number of sites that allow users to upload large files that can then be downloaded from another computer. (A few of the questions prompted by the indictment: Why Megaupload? Given the amount of content transferred over the site, how did they possibly estimate the monetary harm to copyright holders, which include, notably, major record labels and movie studios? What will happen to the people who paid for subscriptions to Megaupload?)

What the site's still-operational competitors, including Rapidfire and Sendspace, don't have is a founder as notorious as Schmitz or famous affiliates involved in another legal battle with record labels. In December, after a music video in support of Megaupload that featured Kanye West, Will.i.am. and Diddy surfaced, Universal Music Group filed a lawsuit against Megaupload for copyright infringement. Earlier this week, the New York Postreported that the producer Swizz Beatz (who is married to Alicia Keys) is the CEO of Megaupload. Swizz Beatz, whose real name is Kasseem Dean, is not named in today's indictment.

UPDATE 4:15 p.m. Friday, January 20: Ira Rothken, an attorney for Megaupload, says the producer never officially became the CEO of the company, despite yesterday's confirmation by Swizz's publicist that he was. "To my knowledge, Swizz Beatz was never involved in any meaningful way," Rothken told the website VentureBeat. "He was negotiating to become the CEO, but it was never official."

In 2005, the Supreme Court decided against the file-sharing site Grokster in a suit filed by MGM Studios Inc., determining that someone who "distributes a device" (read: VCR, CD burner, file-sharing site) "with the object of promoting its use to infringe copyright ... is liable for the resulting acts of infringement by third parties." Going by this precedent, Megaupload will likely have to show that it was created for a purpose other than file-sharing that infringes on copyrights.

The indictment against Megaupload comes just one day after protests against the Stop Online Piracy Act (SOPA) reached a fever pitch on the Internet, and seems to have provoked a riot of responses. Thursday afternoon the hacker group Anonymous suggested, via its Twitter feed, that it had launched a coordinated attack on websites for the RIAA, MPAA, Copyright.gov, the Justice Department, Universal Records, Warner Music Group and BMI. At various points that afternoon and evening, each of those sites had trouble loading.